Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

In a World Drowning in Debt the US Stands Out

  by    0   0

In a world drowning in debt, the US stands out, according to the International Monetary Fund.

Global debt has reached record levels. According to a recent IMF report, the world has amassed $164 trillion of debt. That comes to 225% of global debt to GDP, levels not seen since the peak of the 2008 financial crisis when combined public and private sector global debt-to-GDP hit 213%.

Three countries account for half of the total global debt – the US, China and Japan.

China is a huge player in global borrowing. The country’s debt surged from $1.7 trillion in 2001 to $25.5 trillion in 2016. The IMF described China as a “driving force” behind the increase in global debts, accounting for three-quarters of the rise in private sector debt in the past decade. Last year, Jim Rickards listed a Chinese debt crisis as one of the possible snowflakes that could set off the next financial avalanche. The mainstream also picked up the theme, with analysts warning exploding Chinese debt could threaten the world financial system.

But according to IMF director Vitor Gaspor, the “United States stands out” in this world of debt. It is the only advanced economy projecting a rise in debt-to-GDP ratio over the next five years.

“We urge policymakers to avoid pro-cyclical policy actions that provide unnecessary stimulus when economic activity is already pacing up,” Gaspar said; or as ZeroHedge translated, “Trump, stop what you are doing before you lead to a debt funding crisis, that finally bursts the global debt bubble. ”

This dovetails with a report from five “A-list economists” who agreed in a recent op-ed that the US is going broke.

The IMF singled out the Trump tax cuts and the massive budget recently passed by Congress, noting they left the US with a deficit of 5% of national income into the medium term and a persistently rising level of debt in GDP.

“In the United States fiscal policy should be recalibrated to ensure that the government debt-to-GDP ratio declines over the medium term. This should be achieved by mobilizing higher revenues and gradually curbing public spending dynamics, while shifting its composition toward much-needed infrastructure investment.”

Notice the IMF primarily focuses on the evils of tax cuts. And while it does mention a need for reductions in spending, it’s perfectly happy with “infrastructure” spending. This is typical Keynesianism. In fact, runaway spending remains the fundamental problem after Americans got tax relief without any corresponding government relief.

The IMF also noted the problem of massive debt in a rising interest rate environment. According to its report, the interest burden has doubled in the past ten years to close to 20% of taxes, an escalating cost which “reflects in part the increasing reliance on nonconcessional debt, as countries have gained access to international financial markets and expanded domestic debt issuance to nonresidents.”

The IMF warned the world urgently needs to reduce global debt in both the private and public sectors to improve the resilience of the global economy. “Fiscal stimulus to support demand is no longer the priority.”

ZeroHedge summed things up pretty well.

What we again find odd is how quiet everyone was for the past ten years when central banks, by keeping interest rates at record low levels, enabled the world’s biggest debt issuance spree, for both public and private debt, and now that debt is at a level that even Goldman recently said is no longer sustainable, suddenly everyone – from central banks, to bank CEOs, to NGOs – is screaming from the rooftops how dangerous debt really is …

Reading the IMF report between the lines, it is nothing more than advance scapegoating for the inevitable global debt crisis that is coming, and which not even the IMF is hiding any more. What is most comical – if completely expected – is that the IMF is now blaming it all on Trump: not on generations of economists who steered the world to the point where there is more than $3 of debt for every $1 of GDP, and not on central bankers who flooded the world with debt so that the richest 0.01% can be richer than their wildest dream. Nope: it’s all Trump’s fault.

Somehow we doubt this advance damage control will work after the next, and likely final, crash.

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Subprime Credit Card Charge-Offs Remain at Great Recession-Era Levels Despite “Booming” Economy

Last week we highlighted the rising level of auto loan delinquencies and the growing number of student loan borrowers who can’t make their payments. This week, we got some more bad news for lenders. Subprime credit card charge-offs remain at levels reminiscent of the Great Recession. In the first quarter of this year, credit card […]

READ MORE →

Texas Takes Another Step to Facilitate the Use of Its Gold Bullion Depository

Texas continues to take steps to make the state more friendly to gold and silver. Earlier this week, the Texas Senate gave final approval to a pair of bills that that would exempt precious metals stored in the Texas Bullion Depository from certain taxes. By repealing taxes on gold and silver, the state will treat […]

READ MORE →

Nope! Nothing to See Here!

Don’t worry. Nothing to see here! That was pretty much the message Federal Reserve Chairman Jerome Powell delivered in a speech he gave at the Atlanta Federal Reserve bank conference on May 20. Powell talked about the high levels of corporate debt. In fact, corporate leverage is at a record level of around 35% of […]

READ MORE →

China Sells Most US Treasuries in 2-1/2 Years Amid Threats of ‘Nuclear Option’

China sold off the highest level of US Treasurys in nearly 2-1/2 years in March. Meanwhile, there are renewed fears the Chinese could implement its “nuclear options” and sell off even more US debt in retaliation for US trade war tariffs. China sold $20.45 billion in Treasuries in March. That was the biggest US debt […]

READ MORE →

Auto Loan Delinquencies Approaching Great Recession Peak

a check engine light is onAuto loan delinquencies have surged to the highest level since 2011 and are approaching levels seen at their peak during the Great Recession. The percentage of outstanding auto loans in serious delinquency (90 days or more past due) jumped to 4.69% in the first quarter of 2019, according to the latest data from the New […]

READ MORE →

Comments are closed.

Call Now